Imagine for a moment that you were back in biblical times as a member of King Saul’s court. You see a small boy offer to fight the mighty Goliath, and then watch in stunned silence as he graciously declines the protection of a bronze helmet and a suit of armor. His confidence is disarming, but you can’t help but think that he’ll soon recognize his own foolishness.
Fast forward a few millennia, and you can better appreciate the questions being asked of David Britts as he recently prepared to leave JPMorgan Partners for a new gig with Palo Alto, Calif.-based ComVentures. Didn’t he want to keep waiting out the economic storm under a wealthy corporate umbrella? If you really feel the need to leave, why go to a firm exclusively dedicated to a communications industry beset by massive devaluation, accounting scandals and spending freezes?
“A lot of people have asked me why I’d want to go to a firm focused on communications while the market is in the freaking toilet,” Britts says.
His answer is twofold. First, he firmly believes that the sector eventually will return to some semblance of its former glory in 18 to 24 months. After all, he argues, the global communications market is too big to disappear, with nearly $1 trillion of value on the services side and another $150 billion worth of equipment assets numbers that could actually grow as more and more data traffic enters the network.
Second, Britts believes that ComVentures is one of very few firms adequately equipped to keep investing in the midst of a market shakeout. “By having a laser focus on the communications space, this team is able to go a lot deeper than some of these other funds that are spread over a bunch of different areas,” Britts explains. “What that means is that these guys have the ability to see some things that others don’t.”
And ComVentures seems to have added a kindred spirit by naming Britts its newest general partner. Unlike many VCs who wander aimlessly from online pet store deals to investments in the latest heart stent developer, Britts is a longtime communications junkie.
After earning his MBA from Wharton in 1993, Britts returned to a pre-business school job with Lehman Brothers and after a few years was prepared to accept an offer from Morgan Stanley Dean Witter. Before he signed a contract, however, former Morgan Stanley banker Bill Brady turned Britts onto a new Silicon Valley outpost of German bank Deutsche Bank AG. Brady and former banking partners Frank Quattrone and George Butros had agreed to launch the technology group, named Deutsche Morgan Grenfell (DMG), in April of 1996, and they were looking for someone to help run the outfit’s communications activities. Britts had never heard of DMG, but he received enough prodding from Brady that he was soon the group’s eighth employee. Britts has heard plenty of criticism about the high-profile Quattrone, but he says of his onetime boss: “Frank was great. It’s funny to hear all of these people going after Frank on integrity because that’s the last thing you could go after Frank on.”
And, looking back, Britts couldn’t be happier that he was able to get in on the ground floor of DMG. That’s where he learned the tools that would later serve him so well as a venture capitalist. “DMG was one of those things where we got into companies real early because we were always competing with firms like Morgan Stanley or Goldman Sachs,” Britts remembers. “As a result, we had to go a whole lot deeper so we could really be advisors as opposed to just bankers sitting around.”
When Quattrone and Co. jumped ship for Credit Suisse First Boston in July of 1998, Britts went with them. Quickly, however, he was ready to leave the investment banking business behind in favor of venture capital. Britts already had some experience with the asset class from working on a small DMG fund designed to facilitate the banking business, and he believed he would be a strong asset given his technology finance background and packed Rolodex.
After six months with CSFB, Britts followed fellow DMG alumnus Phil Summe (now with Gabriel Venture Partners) to JPMorgan Partners (then known as Chase Capital Partners). But unlike Summe, who was going to JPMorgans’ New York headquarters, Britts was asked to remain in California and help build up a fledgling San Francisco office.
“One thing I loved about DMG was that we built up a presence out of nothing, effectively built a brand and became a leader in the space pretty fast,” Britts says. “I saw that same opportunity from [JPMorgan], albeit from a pure venture capital perspective.”
Britts quickly began leveraging his Sand Hill Road contacts for quality deal flow. His first deal came through a relationship with Mayfield, which had a portfolio company named Narus Inc. that needed follow-on capital. Britts and his firm obliged, and he sat alongside Mayfield’s Yogen Dalal on the IP infrastructure company’s board by June of 1999.
As Britts and partners like Shahan Soghikian kept investing in winners like Hotrail Inc. (sold to Conexant Systems Inc. for $450 million), the West Coast practice continued to grow. JPMorgan was pumping nearly 43% of all disbursements into California by 2000, according to market researcher Venture Economics (publisher of Venture Capital Journal). By the end of that year, some critics were accusing the firm of throwing good money after bad such as Britts’ disastrous investments in now-bankrupt Intira Corp. and Pluris Inc. but the West Coast expansion has cemented JPMorgan Partners as one of the nation’s most prominent firms.
At the start of 2002, Britts was happily working away at JPMorgan without any plans to switch gears. He had received some 15 offers over the previous two years, but none of the discussions had gone anywhere. When ComVentures’ Roland Van der Meer called in the spring, Britts couldn’t help but take notice.
“I’d worked with ComVentures on quite a few deals, and I had known Roland and Cliff Higgerson and David Helfrich [all ComVentures partners] for a pretty long time,” Britts says. “It was one of those things where I turned to my wife and said, Good news is ComVentures called; bad news is ComVentures called.'”
Negotiations went on for several months, with ComVentures even lining up a backup candidate in case Britts fell through. By the end, though, Britts found the job too appealing to resist. As part of his transition away from JPMorgan, Britts has maintained his Metro-Optix Corp. board seat and has retained observer rights with three other JPMorgan portfolio companies for at least the next nine months.
In his new position at ComVentures, Britts will focus on early-stage opportunities in the communications systems equipment and semiconductor spaces. With so few early-stage deals being done these days, he should have no shortage of opportunities to pick from.
“This is an opportunity for me, but different than the challenges involved in having to build something up from the ground like at DMG or JPMorgan,” Britts says. “This is really a chance for me to invest in a space I know alongside a team that I think has the most communications experience in the entire venture industry.”
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